Food Industry Grapples With Sustainability Issues

CHRISTINA VEIDERS

WHITE SULPHUR SPRINGS, W.Va. — The food distribution industry is wrestling a chameleon when it comes to environmental sustainability.

The animal's green color can quickly change to yellow, orange or red, depending upon what interest group applies pressure on sustainability fronts.

Last week, executives attending the Grocery Manufacturers Association/Food Products Association's annual Executive Conference at The Greenbrier learned about the complexities, challenges, risks and rewards of this unique animal.

Sustainability has not only captured the attention of the nation, but it is particularly top-of-mind to consumer products manufacturers whose footprint is large in utilizing natural resources and energy in food production, distribution and waste disposal.

Conference sessions related to sustainability signal it is a top priority for GMA/FPA members and retailers going forward.

Presentations and research included:

While attendees tried to get their arms around the far-reaching implications of sustainability, the U.S. Senate began debating proposals for a comprehensive energy policy calling for a greater amount of renewable fuels — ethanol and biodiesel — from 8.5 billion gallons per year in 2008 to 36 billion gallons by 2022.

The GMA/FPA staunchly opposes an energy policy that would dramatically disrupt the food supply chain, such as converting corn for food to corn for fuel promises to do, according to conference speakers. This conversion, which is backed by government subsidies, would greatly impact food production costs, leading to higher overall food prices and inflation, and it would cause further harm to the environment because of the energy sources needed to produce and process corn and convert fertile lands to corn production, they said.

Jerry Taylor, senior fellow of the Cato Institute, delivered a blistering account of ethanol's impact on the environment in a session on that fuel's effect on the CPG industry. “Everything you heard about ethanol is a complete lie with the exception that it is made with corn.”

He said ethanol is not greenhouse-friendly, especially when considering the tremendous amount of coal — the greatest source of greenhouse gas in the U.S. — used in the supply chain to process corn.

“Ethanol is a green fuel only to the extent to which it provides currency which is colored green to farmers and ethanol processors. It is not a green fuel by any other metric, and makes gasoline look like the NRDC's [National Resource Defense Council] fuel of choice,” he said.

Taylor added that Congress and President Bush's plan to expand ethanol will make greenhouse gases far worse than if nothing is done.

Citing a recent Washington Post article, Cal Dooley, GMA/FPA president and chief executive officer, said it would cost taxpayers $140 billion in the next 15 years with existing tax credits in place for ethanol production and increased government mandates.

“We understand we need to have a responsible, renewable and alternative fuel policy, but most Americans didn't sign up for a policy that is increasing the price of fuel at gas pumps and increasing the price of food on grocery shelves,” he told attendees.

Gregory Page, president and CEO of Cargill, Minneapolis, outlined an equally alarming scenario on ethanol's impact on pricing and global food distribution.

Quoting Congressman Collin Peterson, D-Minn., Page said it is true that fuel is repricing agriculture. If mandates for biofuels continue, Page sees a vast restructuring of the entire agricultural landscape in converting or using more land for biofuel production at a time when the world's population and dietary requirements are on the rise.

The constraints being placed on global food production are illustrated by one example Page cited. “There are about 3 billion people living at about $600 [per capita annual income]. If 1.5 billion of those people have their diets raised to the level of Guatemala, it would take more grain crops than the entire product of the U.S. today. These aren't small, incremental changes. These are significant shifts in the absolute amount of food we are called on to produce and, on top of that, partially fuel society.”

SEISMIC SHIFTS

Page noted that in 30 years there hasn't been any change in the amount of land used in food production even as the world's population has grown and the quality of diets has improved. That is considered to be a remarkable achievement by agricultural science and has gone a long way to protect ecosystems and endangered species and provide greenhouse gas benefits.

However, land usage is about to change with the push to increase ethanol production, the speakers warned. “We are about to change the dynamic with ill-timed pressures through increasing biofuels,” resulting in price volatility in overall food production, Page said.

“This needs to be a debate about what are fair prices to all strata of global society. It will increasingly be a debate about land use. In that regard, those with prominent quick-serve restaurants, prominent global retailers, prominent owners of brands should be very concerned about their image,” he said.

In her presentation, Wal-Mart's Dillman said Americans are unwilling to pay for green or to pay for renewables. Page said that has been his experience too. “At the shelf people are increasingly not voting green or not willing to pay for it, [but] when they go to ballot box they seem delighted to pay for it.”